tax 2 finals

7/28/2019 Tax 2 Finals

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Taxation 2 Finals reviewer

Prof. O. Carag

2ndSemester A.Y. 2011-2012

Janz Hanna Ria N. SerranoPart Three: Tax Remedies Under the NIRC

I. Taxpayers RemediesA. Administrative Protest Taxpayers Remedy Before Payment

1. Assessment of Internal Revenue Taxes

NIRC, 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative finds that proper taxes should be

assessed, he shall first notify the taxpayer of his findings: provided, however, That a preassessment notice shall not be required in the

following cases:

(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of thereturn; or

(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to

have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or

quarters of the succeeding taxable year; or

(d) When the excise tax due on exciseable articles has not been paid; or(e) When the article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries

and spare parts, has been sold, traded or transferred to non-exempt persons.

The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be

void.

Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If thetaxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days

from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) daysfrom filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the

taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said

decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.

RR 12-99. Implementing the Provisions of the National Internal Revenue Code of 1997 Governing the Rules on Assessment of National

Internal Revenue Taxes, Civil Penalties and Interest and the Extra-judicial Settlement of a Taxpayer's Criminal Violation of the Code Through

Payment of a Suggested Compromise PenaltySec. 1.Scope. Pursuant to the provisions of Section 244 , in relation to Section 245 of the National Internal Revenue Code of 1997, these

Regulations are hereby promulgated to implement the provisions of Sections 6 , 7 , 204 , 228 , 247 , 248 and 249 on assessment of national

internal revenue taxes, fees and charges and to provide the rules governing the extra-judicial settlement of a taxpayer's criminal violation of

the said Code or any of its implementing Regulations through payment of a suggested compromise penalty.

Sec. 2. General Principles.

2.1. The surcharge and/or interest herein prescribed shall apply to all taxes, fees and charges imposed under the Code which shall be

collected at the same time, in the same manner, and as part of the tax.

2.2. In case the tax due from the taxpayer is paid on a partial or installment basis, the interest on the deficiency tax or on the delinquency

tax liability of the taxpayer shall be imposed from due date of the tax until full payment thereof. The interest shall be computed based onthe diminishing balance of the tax, inclusive of interests.

Sec. 3.Due Process Requirement in the Issuance of a Deficiency Tax Assessment.

3.1. Mode of procedures in the issuance of a deficiency tax assessment:

3.1.1. Notice for informal conference. The Revenue Officer who audited the taxpayer's records shall, among others, state in his

report whether or not the taxpayer agrees with his findings that the taxpayer is liable for deficiency tax or taxes. If the taxpayer is not

amenable, based on the said Officer's submitted report of investigation, the taxpayer shall be informed, in writing, by the Revenue

District Office or by the Special Investigation Division, as the case may be (in the case Revenue Regional Offices) or by the Chief of

Division concerned (in the case of the BIR National Office) of the discrepancy or discrepancies in the taxpayer's payment of his internal

revenue taxes, for the purpose of "Informal Conference," in order to afford the taxpayer with an opportunity to present his side of the

case. If the taxpayer fails to respond within fifteen (15) days from date of receipt of the notice for informal conference, he shall beconsidered in default, in which case, the Revenue District Officer or the Chief of the Special Investigation Division of the Revenue

Regional Office, or the Chief of Division in the National Office, as the case may be, shall endorse the case with the least p ossible delay to

the Assessment Division of the Revenue Regional Office or to the Commissioner or his duly authorized representative, as the case may

be, for appropriate review and issuance of a deficiency tax assessment, if warranted.

3.1.2. Preliminary Assessment Notice (PAN).If after review and evaluation by the Assessment Division or by the Commissioner

or his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to assess the taxpayer forany deficiency tax or taxes, the said Office shall issue to the taxpayer, at least by registered mail, a Preliminary Assessment Notice

(PAN) for the proposed assessment, showing in detail, the facts and the law, rules and regulations, or jurisprudence on which the

proposed assessment is based (see illustration in ANNEX A hereof). If the taxpayer fails to respond within fifteen (15) days from dateof receipt of the PAN, he shall be considered in default, in which case, a formal letter of demand and assessment notice shall be caused

to be issued by the said Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.

3.1.3. Exceptions to Prior Notice of the Assessment. The notice for informal conference and the preliminary assessment notice

shall not be required in any of the following cases, in which case, issuance of the formal assessment notice for the payment of the

taxpayer's deficiency tax liability shall be sufficient:

(i) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face

of the tax return filed by the taxpayer; or

(ii) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholdingagent; or

(iii) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period wasdetermined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for

the taxable quarter or quarters of the succeeding taxable year; or

(iv) When the excise tax due on excisable articles has not been paid; or(v) When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment,

machineries and spare parts, has been sold, traded or transferred to non-exempt persons.

3.1.4. Formal Letter of Demand and Assessment Notice. The formal letter of demand and assessment notice shall be issued by the

Commissioner or his duly authorized representative. The letter of demand calling for payment of the taxpayer's deficiency tax or taxes

shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of

demand and assessment notice shall be void (see illustration in ANNEX B hereof). The same shall be sent to the taxpayer only byregistered mail or by personal delivery. If sent by personal delivery, the taxpayer or his duly authorized representative shall

acknowledge receipt thereof in the duplicate copy of the letter of demand, showing the following: (a) His name; (b) signature; (c)

designation and authority to act for and in behalf of the taxpayer, if acknowledged received by a person other than the taxpayer

himself; and (d) date of receipt thereof.

3.1.5. Disputed Assessment. The taxpayer or his duly authorized representative may protest administratively against the aforesaid

formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof. If there are several issues involved

in the formal letter of demand and assessment notice but the taxpayer only disputes or protests against the validity of some of the

issues raised, the taxpayer shall be required to pay the deficiency tax or taxes attributable to the undisputed issues, in which case, a


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Janz Hanna Ria N. Serranocollection letter shall be issued to the taxpayer calling for payment of the said deficiency tax, inclusive of the applicable surchargeand/or interest. No action shall be taken on the taxpayer's disputed issues until the taxpayer has paid the deficiency tax or taxes

attributable to the said undisputed issues. The prescriptive period for assessment or collection of the tax or taxes attributable to the

disputed issues shall be suspended.

The taxpayer shall state the facts, the applicable law, rules and regulations, or jurisprudence on which his protest is based,

otherwise, his protest shall be considered void and without force and effect. If there are several issues involved in the disputed

assessment and the taxpayer fails to state the facts, the applicable law, rules and regulations, or jurisprudence in support of his protest

against some of the several issues on which the assessment is based, the same shall be considered undisputed issue or issues, in which

case, the taxpayer shall be required to pay the corresponding deficiency tax or taxes attributable thereto.

The taxpayer shall submit the required documents in support of his protest within sixty (60) days from date of filing of his

letter of protest, otherwise, the assessment shall become final, executory and demandable. The phrase "submit the requireddocuments" includes submission or presentation of the pertinent documents for scrutiny and evaluation by the Revenue Officer

conducting the audit. The said Revenue Officer shall state this fact in his report of investigation.

If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within thirty (30) days

from date of receipt thereof, the assessment shall become final, executory and demandable.

If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the Court of Tax Appeals within

thirty (30) days from date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable.

In general, if the protest is denied, in whole or in part, by the Commissioner or his duly authorized representative, the taxpayer

may appeal to the Court of Tax Appeals within thirty (30) days from date of receipt of the said decision, otherwise, the assessment

shall become final, executory and demandable: Provided, however, that if the taxpayer elevates his protest to the Commissioner withinthirty (30) days from date of receipt of the final decision of the Commissioner's duly authorized representative, the latter's decision

shall not be considered final, executory and demandable, in which case, the protest shall be decided by the Commissioner. Cdtai

If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one hundred eighty(180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to

the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period, otherwise, the assessment shall become

final, executory and demandable.

3.1.6. Administrative Decision on a Disputed Assessment. The decision of the Commissioner or his duly authorized

representative shall (a) state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based,

otherwise, the decision shall be void (see illustration in ANNEX C hereof), in which case, the same shall not be considered a decision on

a disputed assessment; and (b) that the same is his final decision.3.1.7. Constructive Service. If the notice to the taxpayer herein required is served by registered mail, and no response is received

from the taxpayer within the prescribed period from date of the posting thereof in the mail, the same shall be considered actually or

constructively received by the taxpayer. If the same is personally served on the taxpayer or his duly authorized representative who,

however, refused to acknowledge receipt thereof, the same shall be constructively served on the taxpayer. Constructive service

thereof shall be considered effected by leaving the same in the premises of the taxpayer and this fact of constructive service is attested

to, witnessed and signed by at least two (2) revenue officers other than the revenue officer who constructively served the same. The

revenue officer who constructively served the same shall make a written report of this matter which shall form part of the docket of

this case (see illustration in ANNEX D hereof).

Sec. 4.Civil Penalties.

4.1. Twenty-Five Percent (25%) Surcharge. There shall be imposed, in addition to the basic tax required to be paid, a penalty

equivalent to twenty-five percent (25%) thereof, in any the following cases:

4.1.1. Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on

the date prescribed; or

4.1.2. Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom

the return is required to be filed; or

4.1.3. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or

4.1.4. Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code

or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for

its payment.4.2. Fifty Percent (50%) Surcharge:

4.2.1. In case of willful neglect to file the return within the period prescribed by the Code, or in case a false or fraudulent return is

willfully made, the penalty to be imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case any payment has been

made on the basis of such return before the discovery of the falsity or fraud: Provided, That a substantial underdeclaration of taxable

sales, receipts or income, or a substantial overstatement of deductions, as determined by the Commissioner or his duly authorized

representative, shall constitute prima facie evidence of a false or fraudulent return: Provided, further, That failure to report sales,receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a claim of deductions in an amount

exceeding thirty percent (30%) of actual deductions, shall render the taxpayer liable for substantial underdeclaration of sales, receipts

or income or for overstatement of deductions, as mentioned herein: Provided, further, that the term "willful neglect to file the returnwithin the period prescribed by the Code" shall not apply in case the taxpayer, without notice from the Commissioner or his

authorized representative, voluntarily files the said return, in which case, only 25% surcharge shall be imposed for late filing and late

payment of the tax in lieu of the above 50% surcharge. Conversely, the 50% surcharge shall be imposed in case the taxpayer files the

return only after prior notice in writing from the Commissioner or his duly authorized representative.

4.2.2. Section 6 (A) of the Code provides that any tax return filed by a taxpayer "may be modified, changed or amended" by the

taxpayer "within three (3) years from date of such filing" provided, however, that "no notice for audit or investigation of such return,

statement or declaration has, in the meantime, been actually served upon the taxpayer." Thus, if upon investigation, it is determined

that the taxpayer's originally filed tax return is false or fraudulent, such taxpayer shall remain liable to the 50% civil penalty

regardless that the taxpayer has filed his amended tax return, if the said amended tax return, however, has been filed only after

issuance of the Letter of Authority for the investigation of the taxpayer's tax return or such amendment has been made in the course ofthe said investigation.

Sec. 5. Mode of Procedures in Computing for the Tax and/or Applicable Surcharge . Shown hereunder are illustrative cases for the

computation and assessment of the tax, inclusive of surcharge (if applicable) and interest:

5.1. Late filing and late payment of the tax. Illustration: Income tax return for the calendar year 1998 was due for filing on April 15,

1999 but the taxpayer voluntarily filed his tax return, without notice from the BIR, only on June 30, 1999. The tax due per return

amounts to P100,000. In this case, the taxpayer shall be liable for delinquency penalties consisting of 25% surcharge, plus 20% interest

per annum, computed from due date of the tax until date of payment, computed as follows [illustration deleted]

Only one 25% surcharge shall be imposed for late filing of the return and late payment of the tax.

5.2. The tax return is filed on time but filed through an internal revenue officer other than with whom the return is required to be filed.Illustration: The taxpayer's 1998 income tax return is required to be filed through the authorized agent bank under the jurisdiction of

RDO East Makati. But, without prior authorization from the BIR, the taxpayer filed his tax return and paid the tax through the authorized

agent bank under the jurisdiction of RDO Davao City. Tax due and paid per return is P100,000.00. [illustration deleted]

5.3. Late filing and late payment due to taxpayer's willful neglect. Illustration: The taxpayer did not file his income tax return for the

calendar year 1997 which was due for filing on April 15, 1998. He was notified by the BIR of his failure to file the tax return, for which

reason, he filed his tax return and paid the tax, only after the said notice, on June 30, 1999. The tax due per return is P100,000.00.


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Janz Hanna Ria N. Serrano5.4. Penalty or penalties for deficiency tax. As a rule, no surcharge is imposed on deficiency tax and on the basic tax. However, if theamount due inclusive of penalties is not paid on or before the due date stated on the demand letter, the corresponding surcharge shall be

imposed. [illustrations deleted]

5.5. Late payment of a deficiency tax assessed. In general, the deficiency tax assessed shall be paid by the taxpayer within the time

prescribed in the notice and demand, otherwise, such taxpayer shall be liable for the civil penalties incident to late payment. [illustration

deleted]

5.6. Computation of 20% interest per annum in case of partial or installment payment of a tax liability. Illustration No. 1: In case

extended payment of the tax is duly authorized. DEF CORPORATION, due to financial incapacity, requested that it be allowed to pay its

income tax liability per return for calendar year 1998, in the amount of P1,000,000.00, in four (4) monthly installments, starting April 15,

1999. Its request has been duly approved pursuant to Sec. 53 of the Tax Code.

In this case, no 25% surcharge shall be imposed for late payment of the tax since its deadline for payment has been dulyextended. However, 20% interest per annum for the extended payment shall be imposed, computed based on the diminishing balance of

the "unpaid amount", pursuant to the provisions of Section 249 (D) of the Code.

No 25% surcharge on extended payment shall be imposed provided, however, that the taxpayer's request for extension of the period

within which to pay is made on or before the deadline prescribed for payment of the tax due. Conversely, if such request is made after the

deadline prescribed for payment, the taxpayer shall already be treated late in payment, in which case, the 25% surcharge shall be

imposed, even if payment of the delinquency be allowed in partial amortization. [illustrations deleted]

Sec. 6.Suggested Compromise Penalty in Extra-judicial Settlement of a Taxpayer's Criminal Violation. Section 204 of the Tax Code of

1997 provides that "All criminal violations may be compromised except: (a) those already filed in court, or (b) those involving fraud." This

means that, in general, the taxpayer's criminal liability arising from his violation of the pertinent provision of the Code may be settled extra-judicially instead of the BIR instituting against the taxpayer a criminal action in Court. A compromise in extra-judicial settlement of the

taxpayer's criminal liability for his violation is consensual in character, hence, may not be imposed on the taxpayer without his consent.

Hence, the BIR may only suggest settlement of the taxpayer's liability through a compromise.The extra-judicial settlement of the taxpayer's criminal liability and the amount of the suggested compromise penalty shall conform with

the schedule of compromise penalties provided under Revenue Memorandum Order No. 1-90 or as hereafter revised.

(a) Assessment Process (RR 12-99), Generali. Tax Audit: examination of books of accounts and other accounting records

- Issuance of letter of authority/letter notice/tax verification notice (TVN)ii. Notice of Informal Conference

iii. Issuance of Preliminary Assessment Notice (PAN)iv. Exceptions to Issuance of PAN

v. Reply to PAN 15 days from receipt. In meritorious cases and upon written request, extension not exceeding 10 days may be giventhe TP to respond

RR 12-85, Sec. 3(a). Regional Office cases The taxpayer shall reply within a period of fifteen (15) days from receipt of the pre-

assessment notice. In meritorious cases and upon written request of the taxpayer an extension may be granted within which to

respond, but in no case shall the extension exceed a total of ten (10) days.

The reply of the taxpayer shall be filed with the Assessment Branch of the Regional Office which has jurisdiction over the case.

vi. Issuance of formal letter of demand and assessment notice/Final Assessment notice

vii. Disputed Assessment reply of Taxpayerviii. Administrative Decision on a Disputed Assessment

(b) Requisites of a Valid AssessmentCIR v. Pascor Realty.

CIR v. Hantex.

CIR v. BPI.

- TP informed in writing of the law and facts on which assessment is made.CIR v. BPI, as liquidator of Paramount Acceptance Corp .

- Notice of assessment sent to taxpayers old office is not a valid assessmentRP v. Leonor de la Rama.

- When tax assessment is deemed madeCIR v. CA.

- All presumptions are in favor of tax assessments(c) Jeopardy assessment (Best Evidence Obtainable Rule)

NIRC, 6(B). Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax Administration

and Enforcement. - (B) Failure to Submit Required Returns, Statements, Reports and other Documents. - When a report required by law

as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules andregulations or when there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the

proper tax on the best evidence obtainable.

In case a person fails to file a required return or other document at the time prescribed by law, or willfully or otherwise files afalse or fraudulent return or other document, the Commissioner shall make or amend the return from his own knowledge and from such

information as he can obtain through testimony or otherwise, which shall be prima facie correct and sufficient for all legal purpose s.

(d) Tax Delinquency and Tax Deficiency(e) Period of Assessment

i. Prescription(1) General rule 3 years

NIRC, 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue

taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding

in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That

in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the daythe return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall

be considered as filed on such last day.

RMC 48-90 (Re: Counting of the 3-year prescriptive period).

Period in the Issuance of Notice of Assessment, or Warrants of Distraint, Levy & Garnishment. Every now and then, an

assessment is issued on what appears to be the "last day" of the prescriptive period prescribed by law, e.g., a 1989 Income

Tax Return filed on April 15, 1986 was assessed for deficiency income tax on April 15, 1989. Pursuant to Sections 203 and

223 (c) of the Tax Code as amended by B.P. Blg. 700 which took effect on April 5, 1984, except in the case of a false or

fraudulent return or failure to file a return, the period with which to make an assessment is three (3) years after the

return is filed. Such tax may be collected by distraint or levy or garnishment or by a proceeding in court within (3) yearsafter assessment of the tax.

When a period covers a leap year, the question is raised as to when the last day of the prescriptive period shall have

expired. Accordingly, in order to have a correct understanding of the procedure in determining the period of limitation

upon assessment and collection when the period covers a leap year, it shall be understood that years are of 365 days

each as provided in Article 13 of the New Civil Code. Consequently, a 3-year prescriptive period for assessment or

collection purposes prescribed under Sections 203 and 223(c) of the Tax Code shall have an aggregate number of

1,095 days (365 days x 3 years = 1,095 days), reckoned from the date of filing of the return, or from the issuance of


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Janz Hanna Ria N. Serranothe assessment, as the case may be. In other words, the 3-year prescriptive period expires on the 1,095th day,notwithstanding the fact that within the period, there is a leap year which is of 366 days.

(2) Exceptionsa. 10 years in case of false or fraudulent return

NIRC, 222(a). Exceptions as to Period of Limitation of Assessment and Collection of Taxes.(a) In the case of a false

or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in

court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery

of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of

fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof.

CIR v. Estate of Benigno Toda.

b. Waiver agreed upon by BIR and TPNIRC, 222(b). Exceptions as to Period of Limitation of Assessment and Collection of Taxes. (b) If before the

expiration of the time prescribed in Section 203 for the assessment of the tax, both the Commissioner and the taxpayer

have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The

period so agreed upon may be extended by subsequent written agreement made before the expiration of the period

previously agreed upon.

(i) RMO 20-90 (Re: Proper Execution of the Waiver of the Statute of Limitations under the NIRC)

(ii) RMC 06-05 (Re: Salient Features of Supreme Court Decision on Waiver of the Statute of Limitations under the TaxCode)

(iii) Revenue Delegation Authority No. 05-01 (Re: Delegation of Authority to Sign and Accept the Waiver of the Defenseof Prescription under the Statute of Limitations)

**for (i)-(iii), see separate document

Phil. Journalists, Inc v. CIR. [RMC 06-05]- Waiver of statute of limitations does not mean that taxpayer relinquishes his/its right to invoke prescription- Waiver of statute of limitations is a bilateral agreement between taxpayer and BIR

- Requirement to furnish taxpayer with copy of the waiver is to give notice of acceptance by the BIR and perfection ofthe agreement

1. A waiver of the statute of limitations under the Tax Code must conform strictly with the provisions of RevenueMemorandum Order No. 20-90 in order to be valid and binding.

1.1. The waiver must specify a definite agreed date between the BIR and the taxpayer within which the former mayassess and collect revenue taxes.

1.2. The waiver must be accepted by the Commissioner of Internal Revenue or his duly authorized representative,and the date of acceptance must be indicated.

1.3. The taxpayer must be furnished a copy of the waiver accepted by the BIR.

2. A waiver of the statute of limitations under the Tax Code, to a certain extent, is a derogation of the taxpayer's rightto security against prolonged and unscrupulous investigations and must therefore be carefully and strictly

construed.

3. A waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription. It is an

agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due isextended to a date certain.

4. A waiver of the statute of limitations is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreementbetween two parties.

CIR v. CA.

- To be binding, waivers require the concurrence of the CIRii. Suspension of Running of the Statute of Limitations

NIRC, 223. Suspension of Running of Statute of Limitations. - The running of the Statute of Limitations provided in Sections 203

and 222 on the making of assessment and the beginning of distraint or levy a proceeding in court for collection, in respect of any

deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or

beginning distraint or levy or a proceeding in court and for sixty (60) days thereafter; when the taxpayer requests for areinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the

return filed upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs the Commissioner of any change

in address, the running of the Statute of Limitations will not be suspended; when the warrant of distraint or levy is duly served

upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be

located; and when the taxpayer is out of the Philippines.

RP v. Ablaza.- Rationale for prescribing a limitation of actions for income tax collection(f) Period of Collection

i. General Rule: BIR must collect the tax judicially or administratively within 5 years from assessmentPNB v. CA, CTA, Savellano, CIR.

ii. Exception: in case of false or fraudulent return without prior assessment, BIR must collect tax judicially within 10 years from

discovery of the falsity or omission

NIRC, 222(c). Exceptions as to Period of Limitation of Assessment and Collection of Taxes (c) Any internal revenue tax

which has been assessed within the period of limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy

or by a proceeding in court within five (5) years following the assessment of the tax.

2. Protesting an Assessment(a) Protest of Assessment by Taxpayer

NIRC, 228,supra.

RR 12-85. Pursuant to Section 326 of the National Internal Revenue Code of 1977, as amended, in relation to Section 4 of the sameCode, the following rules and regulations implementing the provisions of Section 319-A (now 229) of the same Code introduced by P.D.

1773 are hereby promulgated to govern the issuance of assessment notices as well as the adjudication of administrative protests against

said assessments.

POST REPORTING NOTICE

Sec. 1.Post-reporting notice. Upon receipt of the report of findings, the Division Chief, Revenue District Officer or Chief, Office Audit

Section, as the case may be, shall send to the taxpayer a notice for an informal conference before forwarding the report to higher

authorities for approval. The notice which is Annex "A" hereof shall be accompanied by a summary of findings as basis for the informal

conference.

In cases where the taxpayer has agreed in writing to the proposed assessment, or where such proposed assessment has been paid,the required notice may be dispensed with.

PRE-ASSESSMENT NOTICE

Sec. 2. Notice of proposed assessment. When the Commissioner or his duly authorized representative finds that taxes should be

assessed, he shall first notify the taxpayer of his findings in the attached prescribed form as Annex "B" hereof. The notice shall be made in

writing and sent to the taxpayer at the address indicated in his return or at his last known address as stated in his notice of change of

address.

In cases where the taxpayer has agreed in writing to the proposed assessment, or where such proposed assessment has been paid,

the required notice may be dispensed with.


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Janz Hanna Ria N. SerranoSec. 3. Time to reply.Venue for filing reply.(a) Regional Office cases The taxpayer shall reply within a period of fifteen (15) days from receipt of the pre-assessment notice. In

meritorious cases and upon written request of the taxpayer an extension may be granted within which to respond, but in no case

shall the extension exceed a total of ten (10) days.

The reply of the taxpayer shall be filed with the Assessment Branch of the Regional Office which has jurisdiction over the ca se.

(b) National Office cases The taxpayer shall reply within a period of fifteen (15) days from receipt of pre-assessment notice. Inmeritorious cases and upon written request the taxpayer may be given an extension within which to respond but in no case shall

the extension exceed a total of ten (10) days.

The reply of the taxpayer shall be filed with the Sector Audit Review Division or the National Audit Review Division, as the case may

be, having jurisdiction over the case.

With regard to pre-assessment notices sent by the Withholding Tax Division in compliance with withholding tax provisions, thesame shall be filed with the Withholding Tax Division.

Sec. 4. Examination of records. In case the taxpayer responds to the notice within the above-prescribed period, he or his duly

authorized representative shall be allowed to examine the records of the case and to present his arguments in writing protesting the

proposed assessment. Thereafter, the Commissioner or his authorized representative shall, of the basis of the evidence on rec ord, decide

whether or not to approve the report as a prelude to the issuance of the corresponding assessment notice.

ISSUANCE OF ASSESSMENT

Sec. 5.Failure to reply to pre-assessment notices; issuance of assessment. In the event the taxpayer fails to respond to the pre-

assessment notice within the above prescribed period, or when the Commissioner or his duly authorized representative finds the

response to be without merit, he should be informed of such fact and the report of investigation shall be given due co urse.PROTEST TO ASSESSMENT

Sec. 6. Protest. The taxpayer may protest administratively an assessment by filing a written request for reconsideration or

reinvestigation specifying the following particulars:(a) Name of the taxpayer and address for the immediate past three (3) taxable year.(b) Nature of request whether reinvestigation or reconsideration specifying newly discovered evidence he intends to present if it is a

request for investigation.

(c) The taxable periods covered.(d) Assessment number.(e) Date of receipt of assessment notice or letter of demand.

(f) Itemized statement of the findings to which the taxpayer agrees as a basis for computing the tax due, which amount should be paidimmediately upon the filing of the protest. For this purpose, the protest shall not be deemed validly filed unless payment of the

agreed portion of the tax is paid first.

(g) The itemized schedule of the adjustments with which the taxpayer does not agree.(h) A statement of facts and/or law in support of the protest.

A request for reconsideration or reinvestigation of an assessment shall be accompanied by a waiver of the Statute of Limitations in

favor of the government.

For the purpose of the protest herein

(a) Request for reconsideration refers to a plea of re-evaluation of the assessment on the basis of existing records without need

of additional evidence. It may involve both a question of fact or of law or both.(b) Request for reinvestigation refers to a plea of re-evaluation of an assessment on the basis of newly discovered or additional

evidence that a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or law or both.

Sec. 7. When to file protestA protest must be filed within thirty (30) days from receipt of the assessment.

Sec. 8. Where to file protest In Regional Office cases, the request for reconsideration or reinvestigation of assessment shall be filed

with the Collection Branch of the region which has jurisdiction over the case.

For cases handled by the National Office, such request shall be filed with the Collection Office.

Sec. 9. Finality of assessments. If a taxpayer who receives an assessment from the Bureau of Internal Revenue fails to file a protest

within the period prescribed in Section 7 of these regulations, the said assessment shall be final and unappealable and the taxpayer is

thereby precluded from disputing the assessment.

Sec. 10. Appeals of decision of Commissioner or Regional Director of the Court of Tax Appeals. Final decision issued by theCommissioner or Regional Director may be appealed to the Court of Tax Appeals within thirty (30) days from receipt thereof, otherwise

the same shall be final and executory.

Sec. 11.Change of address. In case of change of address, the taxpayer must give written notice thereof to the Revenue District Officer

or the district having jurisdiction over his former legal residence and/or place of business, copy furnished the Revenue District Officer

having jurisdiction over his new legal residence or place of business, the Revenue Computer Center and the Receivable Accounts

Division, BIR, National Office, Quezon City, and in case of failure to do so, any communication referred to in these regulations previouslysent to his former legal residence or business address as appearing in his tax return for the period involved shall be considered valid and

binding for purposes of the period within which to reply.

RR 12-99,supra.(b) Submission of documents within 60 days from filing of protest

CIR v. First Express Pawnshop Co .

- Determination of relevant supporting documents rests on the taxpayer(c) Effect of Failure to Protest render the assessment final, executor and demandable

3. Rendition of Decision by Commissioner(a) Denial of Protest

i. CIRs actions equivalent to denial of protest(1) Filing of criminal action against taxpayer(2) Issuing a warrant of distraint and levy

CIR v. Isabela Cultural Corp.- Final Notice before Seizure is deemed as commissioners final decision

(b) Inaction by commissioner no decision from the CIR within 180 days following the submission by TP of the documents in support ofhis/its protest

4. Remedies of Taxpayer to Action by Commissioner(a) In case of denial of protest within 30 days from receipt of decision, taxpayer may appeal before the CTA

i. What constitutes a decision appealable to CTA?Case(s)

Allied Banking Corp. v. CIR.

CIR v. Ayala Securities Corp.- A final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessmentCIR v. Union Shipping.

Oceaninc Wireless Network v. CIR.

ii. Effect of Failure to Appeal assessment becomes final, demandable and executor

Republic v. CA, Nielson.

(b) In case of inaction by Commission within 180 days from submission of documentsi. Within 30 days after the end of the 180-day period, taxpayer may appeal case to the CTA; or

ii. Taxpayer may await decision of the CIR, thereafter appeal within 30 days from receipt of denial


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Janz Hanna Ria N. SerranoCase(s):RCBC v. CIR.

Lascona Land v. CIR. CTA Case No. 5777reversed by CA: CIR v. Lascona Land CA-GR SP 58061)

(c) Effect of Failure to Appeal assessment becomes ginal, demandable and executoryB. Administrative Claim for refund or recovery of erroneously or illegally collected taxes remedy after payment

1. Legal Basis of Tax RefundsNCC, 2142. Lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly

enriched or benefited at the expense of another.

NCC, 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return

it arises.

2. Statutory Basis for Tax Refund under the Tax CodeNIRC, 204(C).Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - (C) Credit

or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when

they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit

for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in

writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however,

That a return filed showing an overpayment shall be considered as a written claim for credit or refund.

A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any internal revenue tax, excluding

withholding taxes, for which the taxpayer is directly liable. Any request for conversion into refund of unutilized tax credits may be allowed,

subject to the provisions of Section 230 of this Code: Provided, That the original copy of the Tax Credit Certificate showing a creditable balanceis surrendered to the appropriate revenue officer for verification and cancellation: Provided, further, That in no case shall a tax refund be

given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made.

The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the Senate and House of Representati ves,every six (6) months, a report on the exercise of his powers under this Section, stating therein the following facts and information, among

others: names and addresses of taxpayers whose cases have been the subject of abatement or compromise; amount involved; amount

compromised or abated; and reasons for the exercise of power: Provided, That the said report shall be presented to the Oversight Committee

in Congress that shall be constituted to determine that said powers are reasonably exercised and that the government is not unduly deprived

of revenues.

NIRC, 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or proceeding shall be maintained in any court for the recovery of

any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed tohave been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without authority,

or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with

the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or

duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty

regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written

claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have

been erroneously paid.

(a) Scope of claims for refund(b) Necessity of proof for claim of refund(c) Burden of proof on the taxpayer/claimant(d) Nature of erroneously paid tax/illegally assessed collected tax(e) Tax refund v. tax credit

(f) Essential requisites for claim of refundi. Actual collection and receipt by government of tax sought to be recovered (requiring factual proof)ii. Legal basis for grant of refund

3. Who may claim/apply for tax refund/tax credit(a) Taxpayer/withholding agents of non-resident foreign corporations

4. Requirements for refund as laid down by cases(a) Necessity of written claim for refund

CIR v. Rosemarie Acosta.

- Rationale for requiring a written claim for refund

(b) Claim containing a categorical demand for reimbursement(c) Filing of administrative claim for refund and the suit/proceeding before the CTA within 2 years from date of payment regardless of any

supervening causeCIR v. Primetown Property Group.

- The two-year prescriptive period is computed based on Sec. 31 of Admin Code of 1987, not Art. 13 of the Civil CodeCIR v. Phil. American Life Insurance Co.

- Requirements for recovery of any national internal revenue tax assessed or collectedACCRA Investment Corp v. CA.

- When 2-year prescriptive period commences to run- Rationale in computing the 2-year prescriptive period

CIR v. Victorias Milling.

- When period of prescription starts

College of Oral and Dental Surgery v. CTA.

- Failure to institute action within 2 years after payment of tax bars taxpayer from recovery of the sameBPI Leasing Corp v. CA.

- Tax refunds are strictly construed against the person claiming the exemption(i) Meaning of supervening causes

5. Other considerations affecting tax refunds(a) VAT refund/application for tax credit for excess input taxes 2 year period reckoned from the close o taxable quarter when sales

transactions made, not 2 years from date of payment

NIRC, 112(A). Refunds or Tax Credits of Input Tax. -(A) Zero-rated or Effectively Zero-rated Sales.- any VAT-registered person,

whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were

made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except

transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of

zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchangeproceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP):

Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of

goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one

of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, that for a person making

sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated

sales.

(b) No requirement to pay under protest prior to claim for refund/application for tax credit


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Janz Hanna Ria N. Serrano(c) Commissioner may grant tax refund even without written claim where on the face of the return filed upon which payment was made, it is

clear that there was erroneous payment

(d) Partial payment of tax cannot be made the basis of claim for tax refundCIR v. Prieto.

(e) In case refund of taxes paid in installment, 2-year period counted from payment of last installment

CIR v. TMX Sales, CTA.

CIR v. CA.

C. Judicial Remedies

1. Appeal to the CTA(a) In protest cases

NIRC, 228,supra.i. 30 days from receipt of denial of protestii. In case of inaction by CIR, within 30 days following the lapse of the 180-day period for submission of documents

(b) In claim for tax refundNIRC, 229,supra.

i. If no decision from the CIR is forthcoming, before the lapse of the 2-year period from the date of payment of the tax2. Mode of appeal

RA 1125, as amended by RA 9282, Sec. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision,

ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and

Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with theCTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred

to in Section 7(a)(2) herein.

Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules ofCivil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the case of inaction as herein provided,

from the expiration of the period fixed by law to act thereon. A Division of the CTA shall hear the appeal: Provided, however, That with respect

to decisions or rulings of the Central Board of Assessment Appeals and the Regional Trial Court in the exercise of its appellate jurisdiction

appeal shall be made by filing a petition for review under a procedure analogous to that provided for under rule 43 of the 1997 Rules of Civil

Procedure with the CTA, which shall hear the case en banc.

All other cases involving rulings, orders or decisions filed with the CTA as provided for in Section 7 shall be raffled to its Divisions. A

party adversely affected by a ruling, order or decision of a Division of the CTA may file a motion for reconsideration of new trial before thesame Division of the CTA within fifteens (15) days from notice thereof: Provide, however, That in criminal cases, the general rule applicable in

regular Courts on matters of prosecution and appeal shall likewise apply.

No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of Customs or the Re gional

Trial Court, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of

Agriculture, as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his

tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned

government agencies may jeopardize the interest of the Government and/or the taxpayer the Court any stage of the proceeding may suspend

the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount

with the Court.In criminal and collection cases covered respectively by Section 7(b) and (c) of this Act, the Government may directly file the said cases

with the CTA covering amounts within its exclusive and original jurisdiction.

3. Who may appealRA 1125, as amended by RA 9282, Sec. 11,supra.

4. Jurisdiction of the CTARA 1125, as amended by RA 9282, Sec. 7 . Jurisdiction. - The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes,fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other l aws

administered by the Bureau of Internal Revenue;2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes,

fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or

other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific

period of action, in which case the inaction shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the

exercise of their original or appellate jurisdiction;4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure,detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under

the Customs Law or other laws administered by the Bureau of Customs;5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the

assessment and taxation of real property originally decided by the provincial or city board of assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of theCommissioner of Customs which are adverse to the Government under Section 2315 of the Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and theSecretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing duties

under Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act No.

8800, where either party may appeal the decision to impose or not to impose said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National Internal Revenue Code or Tariffand Customs Code and other laws administered by the Bureau of Internal Revenue or the Bureau of Customs: Provided,

however, That offenses or felonies mentioned in this paragraph where the principal amount o taxes and fees, exclusive of

charges and penalties, claimed is less than One million pesos (P1,000,000.00) or where there is no specified amount claimed

shall be tried by the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court

to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for

taxes and penalties shall at all times be simultaneously instituted with, and jointly determined in the same proceeding by the

CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to

reserve the filling of such civil action separately from the criminal action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:a) Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally decided by

them, in their respected territorial jurisdiction.

b) Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise of theirappellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and

Municipal Circuit Trial Courts in their respective jurisdiction.

c) Jurisdiction over tax collection cases as herein provided:1) Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees,

charges and penalties: Provided, however, That collection cases where the principal amount of taxes and fees,


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Janz Hanna Ria N. Serranoexclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) shall be tried by theproper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.

2) Exclusive appellate jurisdiction in tax collection cases:(a) Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases

originally decided by them, in their respective territorial jurisdiction.

(b) Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the Exercise oftheir appellate jurisdiction over tax collection cases originally decided by the Metropolitan Trial Courts,

Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction.

5. Procedure in the CTAA.M. No. 05-11-07-CTA,see separate document6. Appeal from the CTA (division) to CTA en banc and from CTA en banc to SC

RA 1125, as amended by RA 9282, Sec. 18 . Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving matter arising underthe National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained, except as herein

provided, until and unless an appeal has been previously filed with the CTA and disposed of in accordance with the provisions of this Act.

A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for

review with the CTA en banc.

RA 1125, as amended by RA 9282, Sec. 19 . Review by Certiorari. - A party adversely affected by a decision or ruling of the CTA en banc may

file with the Supreme Court a verified petition for review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil Procedure

II. Governments RemediesA. Administrative Remedies

NIRC, 205. Remedies for the Collection of Delinquent Taxes.- The civil remedies for the collection of internal revenue taxes, fees or charges, andany increment thereto resulting from delinquency shall be:

(a) By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts,

credits, bank accounts and interest in and rights to personal property, and by levy upon real property and interest in rights to realproperty; and

(b) By civil or criminal action.

Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes:

Provided, however, That the remedies of distraint and levy shall not be availed of where the amount of tax involve is not more than One hundred

pesos (P100).

The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as

finally decided by the Commissioner.The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means of civil or criminal action, including

the preservation or transportation of personal property distrained and the advertisement and sale thereof, as well as of real property and

improvements thereon.

1. Tax Lien

NIRC, 219. Nature and Extent of Tax Lien.- If any person, corporation, partnership, joint-account (cuentas en participacion), association or

insurance company liable to pay an internal revenue tax, neglects or refuses to pay the same after demand, the amount shall be a lien in favor

of the Government of the Philippines from the time when the assessment was made by the Commissioner until paid, with interests, penalties,

and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: Provided, That this lien shall

not be valid against any mortgagee purchaser or judgment creditor until notice of such lien shall be filed by the Commissioner in the office ofthe Register of Deeds of the province or city where the property of the taxpayer is situated or located.

RMC 2-94.

HSBC v. Commissioner.

Republic v. Enriquez.

- Tax lien is more superior than a private litigants claim predicated on a judgment(a) Actual distraint

NIRC, 207(A). Summary Remedies. - (A) Distraint of Personal Property.- Upon the failure of the person owing any delinquent tax or

delinquent revenue to pay the same at the time required, the Commissioner or his duly authorized representative, if the amount involved

is in excess of One million pesos (P1,000,000), or the Revenue District Officer, if the amount involved is One million pesos (P1,000,000)

or less, shall seize and distraint any goods, chattels or effects, and the personal property, including stocks and other securities, debts,credits, bank accounts, and interests in and rights to personal property of such persons ;in sufficient quantity to satisfy the tax, or charge,

together with any increment thereto incident to delinquency, and the expenses of the distraint and the cost of the subsequent sale.

A report on the distraint shall, within ten (10) days from receipt of the warrant, be submitted by the distraining officer to the

Revenue District Officer, and to the Revenue Regional Director: Provided, That the Commissioner or his duly authorized representative

shall, subject to rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, have the

power to lift such order of distraint: Provided, further, That a consolidated report by the Revenue Regional Director may be required bythe Commissioner as often as necessary.

(b) Constructive DistraintNIRC, 206. Constructive Distraint of the Property of A Taxpayer. - To safeguard the interest of the Government, the Commissionermay place under constructive distraint the property of a delinquent taxpayer or any taxpayer who, in his opinion, is retiring from any

business subject to tax, or is intending to leave the Philippines or to remove his property therefrom or to hide or conceal h is property or

to perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him.

The constructive distraint of personal property shall be affected by requiring the taxpayer or any person having possession or

control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered

and not to dispose of the same ;in any manner whatever, without the express authority of the Commissioner.

In case the taxpayer or the person having the possession and control of the property sought to be placed under constructive

distraint refuses or fails to sign the receipt herein referred to, the revenue officer effecting the constructive distraint shall proceed to

prepare a list of such property and, in the presence of two (2) witnessed, leave a copy thereof in the premises where the property

distrained is located, after which the said property shall be deemed to have been placed under constructive distraint.(c) Procedure for Distraint and Garnishment

NIRC, 208.Procedure for Distraint and Garnishment. - The officer serving the warrant of distraint shall make or cause to be made an

account of the goods, chattels, effects or other personal property distrained, a copy of which, signed by himself, shall be left either with

the owner or person from whose possession such goods, chattels, or effects or other personal property were taken, or at the dwelling or

place of business of such person and with someone of suitable age and discretion, to which list shall be added a statement of the sum

demanded and note of the time and place of sale.

Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the taxpayer and upon the

president, manager, treasurer or other responsible officer of the corporation, company or association, which issued the said stocks or

securities.Debts and credits shall be distrained by leaving with the person owing the debts or having in his possession or under his control

such credits, or with his agent, a copy of the warrant of distraint. The warrant of distraint shall be sufficient authority to the person

owning the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the

amount of such debts or credits.

Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president, manager,

treasurer or other responsible officer of the bank. Upon receipt of the warrant of garnishment, the bank shall tun over to the

Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the Government.


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Janz Hanna Ria N. SerranoNIRC, 209. Sale of Property Distrained and Disposition of Proceeds. - The Revenue District Officer or his duly authorizedrepresentative, other than the officer referred to in Section 208 of this Code shall, according to rules and regulations prescribed by the

Secretary of Finance, upon recommendation of the Commissioner, forthwith cause a notification to be exhibited in not less than two (2)

public places in the municipality or city where the distraint is made, specifying; the time and place of sale and the articles distrained. The

time of sale shall not be less than twenty (20) days after notice. One place for the posting of such notice shall be at the O ffice of the Mayor

of the city or municipality in which the property is distrained.

At the time and place fixed in such notice, the said revenue officer shall sell the goods, chattels, or effects, or other personal

property, including stocks and other securities so distrained, at public auction, to the highest bidder for cash, or with the approval of the

Commissioner, through duly licensed commodity or stock exchanges.

In the case of Stocks and other securities, the officer making the sale shall execute a bill of sale which he shall deliver to the buyer,

and a copy thereof furnished the corporation, company or association which issued the stocks or other securities. Upon receipt of thecopy of the bill of sale, the corporation, company or association shall make the corresponding entry in its books, transfer the stocks or

other securities sold in the name of the buyer, and issue, if required to do so, the corresponding certificates of stock or other securities.

Any residue over and above what is required to pay the entire claim, including expenses, shall be returned to the owner of the

property sold. The expenses chargeable upon each seizure and sale shall embrace only the actual expenses of seizure and prese rvation of

the property pending ;the sale, and no charge shall be imposed for the services of the local internal revenue officer or his deputy.

NIRC, 210. Release of Distrained Property Upon Payment Prior to Sale . - If at any time prior to the consummation of the sale all

proper charges are paid to the officer conducting the sale, the goods or effects distrained shall be restored to the owner.

NIRC, 211. Report of Sale to Bureau of Internal Revenue.- Within two (2) days after the sale, the officer making the same shall make a

report of his proceedings in writing to the Commissioner and shall himself preserve a copy of such report as an official record.NIRC, 212. Purchase by Government at Sale Upon Distraint. - When the amount bid for the property under distraint is not equal to

the amount of the tax or is very much less than the actual market value of the articles offered for sale, the Commissioner or his deputy

may purchase the same in behalf of the national Government for the amount of taxes, penalties and costs due thereon.Property so purchased may be resold by the Commissioner or his deputy, subject to the rules and regulations prescribed by

the Secretary of Finance, the net proceeds therefrom shall be remitted to the National Treasury and accounted for as internal revenue.

Sale of Forfeited/seized chattels and removable fixtures

NIRC, 227. Satisfaction of Judgment Recovered Against any Internal Revenue Officer. - When an action is brought against any

Internal Revenue officer to recover damages by reason of any act done in the performance of official duty, and the Commissioner is

notified of such action in time to make defense against the same, through the Solicitor General, any judgment, damages or costs

recovered in such action shall be satisfied by the Commissioner, upon approval of the Secretary of Finance, or if the same be paid by theperson used shall be repaid or reimbursed to him.

No such judgment, damages, or costs shall be paid or reimbursed in behalf of a person who has acted negligently or in bad

faith, or with willful oppression.

NIRC, 228,supra.

2. Levy and Sale of Real PropertyNIRC, 207(B). Summary Remedies (B) Levy on Real Property.- After the expiration of the time required to pay the delinquent tax or

delinquent revenue as prescribed in this Section, real property may be levied upon, before simultaneously or after the distraint of personal

property belonging to the delinquent. To this end, any internal revenue officer designated by the Commissioner or his duly authorized

representative shall prepare a duly authenticated certificate showing the name of the taxpayer and the amounts of the tax and penalty duefrom him. Said certificate shall operate with the force of a legal execution throughout the Philippines.

Levy shall be affected by writing upon said certificate a description of the property upon which levy is made. At the same time, written

notice of the levy shall be mailed to or served upon the Register of Deeds for the province or city where the property is located and upon the

delinquent taxpayer, or if he be absent from the Philippines, to his agent or the manager of the business in respect to which the liability arose,

or if there be none, to the occupant of the property in question.

In case the warrant of levy on real property is not issued before or simultaneously with the warrant of distraint on personal property,

and the personal property of the taxpayer is not sufficient to satisfy his tax delinquency, the Commissioner or his duly authorized

representative shall, within thirty (30) days after execution of the distraint, proceed with the levy on the taxpayer's real property.

Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by the levying officer to the Commissioner or

his duly authorized representative: Provided, however, That a consolidated report by the Revenue Regional Director may be required by theCommissioner as often as necessary: Provided, further, That the Commissioner or his duly authorized representative, subject to rules and

regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, shall have the authority to lift warrants of

levy issued in accordance with the provisions hereof.

NIRC, 213.Advertisement and Sale.- Within twenty (20) days after levy, the officer conducting the proceedings shall proceed to advertise

the property or a usable portion thereof as may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period

of a least thirty (30) days. It shall be effectuated by posting a notice at the main entrance of the municipal building or city hall and in public andconspicuous place in the barrio or district in which the real estate lies and ;by publication once a week for three (3) weeks in a newspaper of

general circulation in the municipality or city where the property is located. The advertisement shall contain a statement of the amount of

taxes and penalties so due and the time and place of sale, the name of the taxpayer against whom taxes are levied, and a short description ofthe property to be sold. At any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the taxes,

penalties and interest. If he does not do so, the sale shall proceed and shall be held either at the main entrance of the municipal building or city

hall, or on the premises to be sold, as the officer conducting the proceedings shall determine and as the notice of sale shall specify.

Within five (5) days after the sale, a return by the distraining or levying officer of the proceedings shall be entered upon the records of

the Revenue Collection Officer, the Revenue District officer and the Revenue Regional Director. The Revenue Collection Officer, in consultation

with the Revenue district Officer, shall then make out and deliver to the purchaser a certificate from his records, showing the proceedings of

the sale, describing the property sold stating the name of the purchaser and setting out the exact amount of all taxes, penalties and interest:

Provided, however, That in case the proceeds of the sale exceeds the claim and cost of sale, the excess shall be turned over to the owner of the

property.

The Revenue Collection Officer, upon approval by the Revenue District Officer may, out of his collection, advance an amount sufficient todefray the costs of collection by means of the summary remedies provided for in this Code, including ;the preservation or transportation in

case of personal property, and the advertisement and subsequent sale, both in cases of personal and real property including improvements

found on the latter. In his monthly collection reports, such advances shall be reflected and supported by receipts.

NIRC, 214. Redemption of Property Sold.- Within one (1) year from the date of sale, the delinquent taxpayer, or any one for hi m, shall have

the right of paying to the Revenue District Officer the amount of the public taxes, penalties, and interest thereon from the date of delinquency

to the date of sale, together with interest on said purchase price at the rate of fifteen percent (15%) per annum from the date of purchase to

the date of redemption, and such payment shall entitle the person paying to the delivery of the certificate issued to the purchaser and a

certificate from the said Revenue District Officer that he has thus rede emed the property, and the Revenue District Officer shall forthwith pay

over to the purchaser the amount by which such property has thus been redeemed, and said property thereafter shall be free form the lien ofsuch taxes and penalties.

The owner shall not, however, be deprived of the possession of the said property and shall be entitled to the rents and other income

thereof until the expiration of the time allowed for its redemption.

3. Forfeiture of real property to the Government for want of bidder

NIRC, 215. Forfeiture to Government for Want of Bidder.- In case there is no bidder for real property exposed for sale as herein above

provided or if the highest bid is for an amount insufficient to pay the taxes, penalties and costs, the Internal Revenue Officer conducting the

sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two (2) days thereafter, shall

make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. It shall be the duty of the Register of


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Janz Hanna Ria N. SerranoDeeds concerned, upon registration with his office of any such declaration of forfeiture, to transfer the title of the property forfeited to theGovernment without the necessity of an order from a competent court.

Within one (1) year from the date of such forfeiture, the taxpayer, or any one for him may redeem said property by paying to the

Commissioner or the latter's Revenue Collection Officer the full amount of the taxes and penalties, together with int erest thereon and the costs

of sale, but if the property be not thus redeemed, the forfeiture shall become absolute.

(a) Resale of forfeited property transferred in the name of governmentRR 22-02.

4. Further distraint and levy

NIRC, 217. Further Distraint or Levy. - The remedy by distraint of personal property and levy on realty may be repeated if necessary until

the full amount due, including all expenses, is collected.

5. Suspension of business operations6. Non-availability of injunction to restrain collection of tax

NIRC, 218. Injunction not Available to Restrain Collection of Tax.- No court shall have the authority to grant an injunction to restrain the

collection of any national internal revenue tax, fee or charge imposed by this Code.

Southern Cross Cement Corp v. Phil. Cement Manufacturers Corp.

- Imposition of safeguard measures should not be enjoined despite availability of judicial reviewCIR v. Cebu Portland Cement.

- Rationale for prohibiting injunctions from restraining tax collectionChurchill v. Rafferty.

- By taking away injunction, the State leaves the taxpayer to the same ordinary remedial actions prevailing between citizen and citizen- Illegality or unconstitutionality of a tax does not authorize the courts to restrain its collection by injunction- Tax collectors are authorized to seize and sell property of delinquent taxpayers without court assistance

- No government could exist if every litigious man were permitted to delay the collection of its taxesB. Judicial Remedies

NIRC, 220. Form and Mode of Proceeding in Actions Arising under this Code . - Civil and criminal actions and proceedings instituted in behalf of

the Government under the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the

Government of the Philippines and shall be conducted by legal officers of the Bureau of Internal Revenue but no civil or criminal action for the

recovery of taxes or the enforcement of any fine, penalty or forfeiture under this Code shall be filed in court without the approval of the

Commissioner.

NIRC, 221. Remedy for Enforcement of Statutory Penal Provisions. - The remedy for enforcement of statutory penalties of all sorts shall be bycriminal or civil action, as the particular situation may require, subject to the approval of the Commissioner.

NIRC, 281. Prescription for Violations of any Provision of this Code. - All violations of any provision of this Code shall prescribe after Five (5)

years.

Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from

the discovery thereof and the institution of judicial proceedings for its investigation and punishment.

The prescription shall be interrupted when proceedings are instituted against the guilty persons and shall begin to run again if the

proceedings are dismissed for reasons not constituting jeopardy.

The term of prescription shall not run when the offender is absent from the Philippines.

Quirico Ungab v. Vicente Cusi.- Assessment of a deficiency is not necessary to a criminal prosecution for tax evasion

III. Statutory Offenses and PenaltiesA. Civil Penalties

1. Surcharge

(a) General 25%NIRC, 248(A). Civil Penalties. (A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-

five percent (25%) of the amount due, in the following cases:

(1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations onthe date prescribed; or

(2) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whomthe return is required to be filed; or

(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or(4) Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code

or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date

prescribed for its payment.

(b) In case of willful neglect to file return, filing of false/fraudulent return 50%NIRC, 248(B). In case of willful neglect to file the return within the period prescribed by this Code or by rules and regulations, or in ca sea false or fraudulent return is willfully made, the penalty to be imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in

case, any payment has been made on the basis of such return before the discovery of the falsity or fraud: Provided, That a substantialunderdeclaration of taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the Commissioner

pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall constitute prima facie evidence of a false or

fraudulent return: Provided, further, That failure to report sales, receipts or income in an amount exceeding thirty percent (30%) of that

declared per return, and a claim of deductions in an amount exceeding (30%) of actual deductions, shall render the taxpayer liable for

substantial underdeclaration of sales, receipts or income or for overstatement of deductions, as mentioned herein.

2. Interest

NIRC, 249. Interest.

(a) In general (20%)NIRC, 249(A). In General.- There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent

(20%) per annum, or such higher rate as may be prescribed by rules and regulations, from the date prescribed for payment until theamount is fully paid.

(b) Deficiency InterestNIRC, 249(B). Deficiency Interest.- Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest

prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full

payment thereof

(c) Delinquency InterestNIRC, 249(C). Delinquency Interest.- In case of failure to pay:

(1) The amount of the tax due on any return to be filed, or

(2) The amount of the tax due for which no return is required, or(3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner,

there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the

amount is fully paid, which interest shall form part of the tax.

(d) Interest on Extended Payment

NIRC, 249(D). Interest on Extended Payment. - If any person required to pay the tax is qualified and elects to pay the tax on

installment under the provisions of this Code, but fails to pay the tax or any installment hereof, or any part of such amount or installment

on or before the date prescribed for its payment, or where the Commissioner has authorized an extension of time within which to pay a


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Janz Hanna Ria N. Serranotax or a deficiency tax or any part thereof, there shall be assessed and collected interest at the rate hereinabove prescribed on the tax ordeficiency tax or any part thereof unpaid from the date of notice and demand until it is paid.

3. Other Fines and Penalties(a) Failure to file certain returns

NIRC, 250. Failure to File Certain Information Returns. -In the case of each failure to file an information return, statement or list, or

keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless it is

shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commisssioner,

be paid by the person failing to file, keep or supply the same, One thousand pesos (1,000) for each failure: Provided, however, That the

aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-five thousand pesos (P25,000).

(b) Failure of withholding agent to collect and remit taxNIRC, 251. Failure of a Withholding Agent to Collect and Remit Tax. - Any person required to withhold, account for, and remit any taximposed by this Code or who willfully fails to withhold such tax, or account for and remit such tax, or aids or abets in an